2014 Portfolio Thoughts

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Topic Author
trekwars2000
Posts: 55
Joined: Sat Mar 12, 2011 8:33 pm

2014 Portfolio Thoughts

Post by trekwars2000 »

So we are just doing our yearly check-in and asset reallocation. Before doing that, we'd love other inputs here.

Emergency funds = Not really as we can tap our HSA for previously non-reimbursed medical expenses

Others funds = $16500-18500 (car currently pending sale at consignment dealer), $2500 tax refund if we invest the full tIRA amount

Debt:
- $325K Mortgage @ 3.125% on a 15 year fixed loan (14.8 years remaining on 328K loan, just refied - appraised at 390K)
- $4,700 @ 0.0% on a Credit Card, until August 2014
- $32,000 @ 3.99% on a new car – need to make 4 payments before we can refi to 1.49%/3 yrs

Tax Filing Status: Married filing Jointly

Tax Rate: 25% Federal, No State Tax (NV)

Age: 32/33 + 2 year old and trying for 1 more

Desired Asset allocation: 53% US stocks, 22% Int’l stocks, 25% bonds

His (old company) SEP-IRA looks like this:
Value: $21.7K
(21.3%) Vanguard Total Int’l Stock Index Admiral (VTIAX ER:0.18): $14.2K
(11.1%) Vanguard Total Stock Market Index Admiral (VGSIX ER:0.06): $7.4K

Her (old company) Rollover IRA looks like:
Value: $13.1K
(19.7%) Vanguard Total Stock Market Index Admiral (VTSAX ER:0.05): $13.1K

His (current company) 401K looks like:
Value: $32.3K
(23.4%) Vanguard Total Bond Index (VBMFX ER: 0.22) $15.6K
(24.5%) Vanguard 500 Index Fund S&P 500 Index (VIFSX ER: 0.06) $16.4K

Total of All Retirement Accounts Together: ~ $66.8K

His (current company) HSA looks like:
Value: $13K
Cash: $1.5K @ 0.6%
Investments: $11.5K
Vanguard Long-Term Bond Index $3.1K
Vanguard Energy Fund $1.4K
Vanguard Mid-Cap Index $7.0K

Our son’s 529 looks like:
Value: $3500

Available to invest:
~$5000 Her 2013 Traditional IRA contribution – funds available after the car sells

When we make the above investment it will put the portfolio AA to 58.8/19.8/21.8% - so a little high in stocks and low in bonds and Int’l

Our 2014 New annual Contributions
~$12000 his 401k (including 3% annual matching contribution)
~$4300 her 403b (new next year, including 2% annual matching contribution)
$6,550 his HSA (including $1000 employer contribution, $1000 into cash account with 0% rate and the rest into the investment side)

Her 403b options:
NW Retirement Income R2 (NWRBX ER: 1.17)
NW Inv Dest Mod R2 (GMDRX ER: 1.12)
NW Inv Dest Mod Cnsrv R2 (GMMRX ER: 1.14)
NW Inv Dest Mod Aggr R2 (GMARX ER: 1.13)
NW Inv Dest Cnsrv R2 (GCFRX ER: 1.15)
NW Inv Dest Aggr R2 (GAFRX ER: 1.14)
NW Dest 2050 R2 (NWOBX ER: 1.18)
NW Dest 2045 R2 (NWNBX ER: 1.18)
NW Dest 2040 R2 (NWMDX ER: 1.18)
NW Dest 2035 R2 (NWLBX ER: 1.17)
NW Dest 2030 R2 (NWBIX ER: 1.17)
NW Dest 2025 R2 (NWHBX ER: 1.17)
NW Dest 2020 R2 (NWFTX ER: 1.17)
NW Dest 2015 R2 (NWEBX ER: 1.17)
NW Dest 2010 R2 (NWDBX ER: 1.17)

Questions and commentary:
1) What fund to choose for her 403b?
With a $1000 match from her employer we can put up with the extremely high ERs; but it is a bit of alphabet soup to us as there are no “straight” stock or bond funds.

2) Should we contribute the full $5000 to her tIRA with other current debts?
As mentioned, we are selling a car to replace the car we just bought. We could use all the sale price to pay down the car but after second thought it seems better to use $5000 to fund her tIRA for 2013. Additionally, since her company is starting a match in the 403b this will be the last year she can contribute to a tIRA. If we do not contribute the $5000 our tax refund should be $1000, if we do contribute our refund will be around $2500.

3) What do we do with the car money?
Assuming we do contribute the full amount above, and factoring in our tax refund, this should leave around $15-17K. We would then have the option to pay off the $4700 CC debt and leave around $10K for savings. While we have the HSA with unreimbursed medical expenses, we have been very healthy the last two years, so having the ability to turn it into a true emergency fund hasn’t quite materialized. Also, with the fact that we are going to refi the car to a 1.49% interest rate, 3 year loan, we’re not feeling the need to pay it off faster.

4) What to do about the unbalanced AA?
It seems we can easily fix the Int’l allocation all within his SEP-IRA. For the bonds, should we rebalance within the 401k immediately and then just continue current 40/60 bond/stock contributions? I feel like immediately rebalancing is the right move to take advantage of the “sell high, buy low” philosophy of rebalancing.

5) How to count the HSA money?
We pay for all current medical expenses with after-tax money and do not tough the HSA funds. As mentioned, we have been lucky to be healthy the last two years, and we haven’t had too many medical expenses. Additionally, while we are trying to have another child, she is on a PPO type plan through her employer. That said, should we start to count the HSA as part of our overall allocation? I would say that if we had a deductible meeting event, and had that 10K in savings, I would have no issues paying with that money rather than the HSA. This continues to allow the HSA to build with pre-tax money, tax free.

Any other thoughts on our overall health? We thought it was very important to refi the house from an FHA 4.5% 30 year (3 years into the loan) to a 15 year 3.125% conventional. We will have a small PMI for about 1.5 years until we reach 78%. The thought of saving all that interest and having the house paid off before we had college aged kids was a driving factor. However, as a result it did increase out payment around $500/month which does hurt our ability to save more aggressively into our retirement accounts.

Thanks for the inputs and happy new year!
ieee488
Posts: 1989
Joined: Thu Dec 10, 2009 7:57 am

Re: 2014 Portfolio Thoughts

Post by ieee488 »

trekwars2000 wrote: Vanguard Long-Term Bond Index $3.1K
Vanguard Energy Fund $1.4K
Vanguard Mid-Cap Index $7.0K
Why?
You are invested in total index funds almost everywhere else.
What is going on here?
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Topic Author
trekwars2000
Posts: 55
Joined: Sat Mar 12, 2011 8:33 pm

Re: 2014 Portfolio Thoughts

Post by trekwars2000 »

ieee488 wrote:
trekwars2000 wrote: Vanguard Long-Term Bond Index $3.1K
Vanguard Energy Fund $1.4K
Vanguard Mid-Cap Index $7.0K
Why?
You are invested in total index funds almost everywhere else.
What is going on here?
Thoes are mutual funds within his HSA. We have about 15 other options, but the vanguard funds are by far the lowest ERs. As long as he keeps $1k in the cash part of the HSA account for a small monthly fee, he can invest in mutual funds.
stan1
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Joined: Mon Oct 08, 2007 4:35 pm

Re: 2014 Portfolio Thoughts

Post by stan1 »

Are you eligible to contribute to Roth IRAs directly?
Put another way, is your expected 2013 MAGI less than $178K (full contribution) or $188K (phased contribution)?
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Topic Author
trekwars2000
Posts: 55
Joined: Sat Mar 12, 2011 8:33 pm

Re: 2014 Portfolio Thoughts

Post by trekwars2000 »

stan1 wrote:Are you eligible to contribute to Roth IRAs directly?
Put another way, is your expected 2013 MAGI less than $178K (full contribution) or $188K (phased contribution)?
Yes, we can do Roth IRAs. We never have in the past. We sit in the phase out range for the Child Tax Credit (110-130K MAGI/AGI).
Topic Author
trekwars2000
Posts: 55
Joined: Sat Mar 12, 2011 8:33 pm

Re: 2014 Portfolio Thoughts

Post by trekwars2000 »

trekwars2000 wrote:
stan1 wrote:Are you eligible to contribute to Roth IRAs directly?
Put another way, is your expected 2013 MAGI less than $178K (full contribution) or $188K (phased contribution)?
Yes, we can do Roth IRAs. We never have in the past. We sit in the phase out range for the Child Tax Credit (110-130K MAGI/AGI).
If we are going to do a Roth for 2013, is this something we need to open tomorrow? Also, just found out my son's grandmother put another 1K into his 529, so it should be around $4500.
icefr
Posts: 613
Joined: Sun Apr 17, 2011 10:50 am

Re: 2014 Portfolio Thoughts

Post by icefr »

trekwars2000 wrote:If we are going to do a Roth for 2013, is this something we need to open tomorrow?
No, you should have until mid-April-ish. (I forget the exact date.)
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skow
Posts: 137
Joined: Thu Mar 08, 2007 11:23 pm

Re: 2014 Portfolio Thoughts

Post by skow »

trekwars2000 wrote:
stan1 wrote:Are you eligible to contribute to Roth IRAs directly?
Put another way, is your expected 2013 MAGI less than $178K (full contribution) or $188K (phased contribution)?
Yes, we can do Roth IRAs. We never have in the past. We sit in the phase out range for the Child Tax Credit (110-130K MAGI/AGI).
Just a thought that you might be able to take advantage of more of the Child Tax Credit if you contribute more to your 401k/403b.
Topic Author
trekwars2000
Posts: 55
Joined: Sat Mar 12, 2011 8:33 pm

Re: 2014 Portfolio Thoughts

Post by trekwars2000 »

skow wrote:
trekwars2000 wrote:
stan1 wrote:Are you eligible to contribute to Roth IRAs directly?
Put another way, is your expected 2013 MAGI less than $178K (full contribution) or $188K (phased contribution)?
Yes, we can do Roth IRAs. We never have in the past. We sit in the phase out range for the Child Tax Credit (110-130K MAGI/AGI).
Just a thought that you might be able to take advantage of more of the Child Tax Credit if you contribute more to your 401k/403b.
Yeah, it's tough for us. I'd like to get back down to 110K, but with with already saving ~$18K/yr (between HSA/401/403) and having just refied the home into $6K extra per year payments (15 yr loan vs 30) it is going to be tough to get back down to 110K. We will see what I can do after we see what the car sells for.

Also, I do travel a lot for work (80-100 days per year) and get per diem where I can save the difference. The last year I was in a lot of low PD places where I could maybe make $20/day. This year we will have some expensive trips, where if I eat in the hotel lounge mostly, I can probably net $1500-2000 over a two week trip. We normally use this extra on house stuff (putting in laminate floors, replacing carpet etc). Perhaps this year we can use this towards extra retirement, esp if we end up having our second child.
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Peter Foley
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Re: 2014 Portfolio Thoughts

Post by Peter Foley »

While I would contribute something to her 403b, I would favor contributing more to your 401k. It is sad that with a public or non profit (403b) that the fund options are all relatively expensive.
Topic Author
trekwars2000
Posts: 55
Joined: Sat Mar 12, 2011 8:33 pm

Re: 2014 Portfolio Thoughts

Post by trekwars2000 »

Peter Foley wrote:While I would contribute something to her 403b, I would favor contributing more to your 401k. It is sad that with a public or non profit (403b) that the fund options are all relatively expensive.
Sounds like we should just put in up to her match at 2% then, right? It is sad too about the ERs. I told her to ask her CFO why it is so bad, but that is too soon. She just fought to get them to match something. Previously there was no match, this is the first year with a match. So before it seemed actually detrimental to save via their 403b vs using an IRA or something else.
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